Apple Computer Co-Founder Strikes Gold With New Stock

By JOHN MARKOFF

Published: November 30, 1995

SAN FRANCISCO, Nov. 29—
In the world of high technology, which keeps score in part by tracking the ups and downs of the stock market, Steven P. Jobs, the co-founder of Apple Computer, re-emerged today as a captain of industry.

Mr. Jobs's company, Pixar Animation Studios, the maker of the blockbuster movie "Toy Story," offered its stock to the public today, and by the end of trading the shares had almost doubled in price. As such, his Pixar stake of 80.2 percent was worth more than $1 billion on paper -- more than the value of his Apple stock at any time during the eight years he ran that company.

The windfall for Mr. Jobs is yet another example of the stock market's extraordinary upward momentum this year, particularly in shares of technology companies. Indeed, the market reached another record today as the Dow Jones industrial average rose 27.46 points, to 5,105.56, its 65th high of the year. [Page D10.]

Mr. Jobs invested $60 million in Pixar and spent nine years waiting for his payoff and his story does have mythic overtones for the computer industry. Mr. Jobs, 40, has long been a mercurial figure in Silicon Valley's hot-house culture, which values entrepreneurs with vision and personal drive -- but which also sees most of its start-up ventures end in failure.

With his gains, Mr. Jobs joins the ranks of technology billionaires in just one day. Most recently, James H. Clark, the founder of the Netscape Communications Corporation, saw his paper wealth pass the $1 billion mark, as his Netscape shares climbed from their initial offering price of $28 on Aug. 8 to $140 today.Mr. Clark invested only $4.1 million to start his company 19 months ago.

With Stephen Wozniak, Mr. Jobs founded Apple in a Cupertino, Calif., garage in 1976. By the early 1980's, Mr. Jobs had risen to international prominence as the personal computer began to transform society.

But that was not to last. In 1985, he was driven from Apple by John Sculley, who Mr. Jobs had hired several years earlier as Apple's president. The following year, Mr. Jobs started Next Inc., which has tried with little success to compete with Apple. As such, Mr. Jobs largely fell out of the industry limelight in recent years.

It was almost as a footnote that Mr. Jobs bought Pixar, a tiny computer company specializing in ultrahigh-resolution computer animation technology, from Lucasfilm for $60 million in 1986.

But today, that footnote symbolized the long-heralded convergence of Hollywood and Silicon Valley.

Pixar's stock was initially priced at $22 a share on Tuesday by the underwriters taking it to the public market. That meant Mr. Jobs's stake was already worth on paper roughly $660 million -- assuming the offering of six million Pixar shares was successful.

And it certainly was. Pixar's shares shot up to $45.50 during their first hour of trading today on the Nasdaq market. Trading had to be delayed because there were too many orders to buy and not enough sellers. The stock eventually traded as high as $49.50 before falling back to close at $39 in heavy trading of 4.8 million shares.

Today, at the close of trading, Mr. Jobs's roughly 30 million Pixar shares were worth about $1.17 billion on paper, a one-day profit of more than $500 million. Of course, there is no guarantee that Pixar's shares will continue to trade as high as $39.

Pixar, which is based in Richmond, Calif., across the bay from San Francisco, is a digital animation studio that relies on computers rather than cameras to make movies. "Toy Story," which was Pixar's first full-length computer-animated effort, was the top box-office draw last weekend, grossing $38 million. The Walt Disney Company, which is distributing "Toy Story," has also hired Pixar to create two other movies.

The success of "Toy Story" is spreading. Toys related to the movie are already on sale for the Christmas season. And a CD-ROM version of the movie is in the works for next Christmas.

Silicon Valley industry watchers said Mr. Jobs's financial reward -- even if it turns out to be fleeting -- was well deserved, since he held onto his Pixar investment through a difficult decade.

"The entrepreneur side of me says, 'Hey, this guy put $60 million into the deal and took a major risk, now he's getting his payback,' " said Anthony Perkins, editor in chief of The Red Herring, a technology and entertainment business magazine based in San Francisco.

When Mr. Jobs first bought Pixar, the company was a manufacturer of specialized high-end graphics computers and software. Only in recent years has he transformed it into a digital movie production company, following the original vision of Pixar's founders, a small group of computer researchers who were pioneers in computer animation.

Mr. Jobs contended today that the money did not mean much to him. Instead, he said he was much more ecstatic that the movie was getting widespread positive reviews.

"There's no yacht in my future," he said. "I've never done this for the money, but I'm grateful that people are believing in our dream and the reality of our achievements."

At Apple Computer, Mr. Jobs and Mr. Wozniak each initially had 8.3 million shares that were worth $28.75 apiece on Dec. 13, 1980, the first day Apple's shares were traded. That gave Mr. Jobs, who was then 25 years old, a worth on paper of $239 million.

Apple's stock peaked in 1987 at $82.25. At that point, Mr. Jobs's original shares would have been worth $683 million. But after losing a bitter battle for the control of Apple in 1985, Mr. Jobs quit and then quickly sold out while Apple's shares were trading below their initial offering price. Industry executives have estimated that he left the company with about $100 million.

In a way, Mr. Jobs's experience at becoming a billionaire parallels that of Mr. Clark of Netscape. Both are remarkable Silicon Valley comeback stories, in a competitive environment in which two-time winners are unusual. Indeed, Mr. Clark founded Netscape last year only after he left the work station maker Silicon Graphics, another company he founded, after a falling-out with its president.

"The two guys were both Silicon Valley outsiders and they've both come booming back," said Michael Murphy, editor of the California Technology Stock Letter. "You can never count anyone out."

But both men still face imposing challenges in proving they can sustain Wall Street's early interest in their ventures. Pixar needs to show that it is not a one-hit wonder.

"The future value of Pixar is a very simple function of their ability to produce another great movie," said Roger McNamee, general partner of Integral Partners, a Menlo Park, Calif., investment firm.

And although the market is treating Pixar as a technology play today, the economics of its business are now far different from most technology companies.

"Pixar needs to be considered in a very different light than any of the big Silicon Valley success stories," said Jim Breyer, managing general partner of Accel Partners, a venture capital firm. "This is fundamentally an entertainment model."

Pixar has lost money in each of the last five years, based on revenues that have ranged from $3.35 million in 1990 to $5.59 million in 1994. The company can still look forward to making at least two more movies for Disney. But Pixar said its second animated movie would not be out before the end of 1998 at the earliest.